1. ^aDepartment Econometria, Estadística i Economia Espanyola, RFA-IREA, University of Barcelona, Diagonal, 690, Barcelona 08034, Spain. E-mail: mguillen@ub.edu
2. ^bEcole Polytechnique, Département d'Economie, Palaiseau 91128, France. E-mail: jean.pinquet@polytechnique.edu

Abstract

This paper analyses the rationale of long-term care (LTC) insurance purchasing from a statistical analysis of insurance data and a life cycle model. We make a short survey of the pros and cons of LTC insurance purchase. Then risk distributions in the occurrence and duration dimension are estimated on a Spanish portfolio. Calendar effects are estimated besides age and gender. These statistical results are integrated in a life cycle model of savings and insurance purchasing. A numerical illustration is also provided, which leads to an optimal age of 40 years for insurance purchase.